July 23 (Bloomberg) -- Six years after John Thain became a
central figure in the financial crisis with his shotgun sale of
Merrill Lynch & Co., he’s helping bring back bank deals.

Thain, 59, was appointed to run CIT Group Inc. in 2010 as
it emerged from bankruptcy. The job was a new start after the
former Merrill Lynch chief executive officer sold the Wall
Street bank for a premium at the worst of the crisis while being
pilloried for $27.6 billion in losses and an office remodeling
that included a $35,000 commode. CIT’s $3.4 billion deal
yesterday to buy OneWest Bank is among the industry’s biggest
since that turmoil, signaling rebounds for the lender and
Thain’s career.

OneWest, backed by billionaires John Paulson and George
Soros and overseen by Chairman Steve Mnuchin, a senior Goldman
Sachs Group Inc. executive with Thain early last decade, has
also revived. OneWest was known as IndyMac Bancorp in 2008 when
it collapsed in the second-largest U.S. commercial bank failure.

“We believe that the primary reason why John Thain took
the CEO job at CIT Group was as a means of reinstating his
reputation,” said Mark Palmer, an analyst at BTIG LLC. “He has
demonstrated his ability to turn around a company.”

By buying OneWest, CIT can access more retail deposits,
cheaper funding that can help boost profitability. Thain’s firm
rose as much as 14 percent yesterday, the most since it exited
bankruptcy. Since Thain joined the firm, the lender has exited
businesses including student loans, halted losses and more than
doubled deposits.

Offensive Strategy

“All of the issues that existed when I joined the company
as it came out of bankruptcy have basically been corrected,”
Thain said in a phone interview. “This is really the first step
in what I would call the offensive part of the strategy.”

CIT’s relationship with regulators has improved since the
firm’s near-collapse. The company reinstated a dividend and
authorized buybacks after the Federal Reserve withdrew its
oversight last year. While the OneWest deal satisfies calls for
CIT to boost deposits, regulators still need to approve a
takeover that would create a bank with $67 billion in assets,
enough to be deemed a systemically important institution subject
to more scrutiny.

“It’s an opportunity for regulators to send a message,”
said David Hilder, an analyst at Drexel Hamilton LLC. “If they
choose to slow it down or put roadblocks in the way, that will
be another strong message that the regulators don’t want
consolidation.”

Since taxpayers rescued the financial system by bailing out
banks that were considered too big to fail, combinations among
the largest lenders have stalled. Regulators have held up
mergers including M&T Bank Corp.’s proposed $3.7 billion
acquisition of Hudson City Bancorp Inc., announced in 2012.

‘Repair Guy’

Thain has “proved himself to be a balance-sheet repair
guy,” said David Ellison, a money manager whose Hennessy Large
Cap Financial Fund invests in banks, including CIT. “This shows
that these two companies, given enough time and given an
environment that is favorable, will recover.”

Hedge funds run by Paulson, 58, made almost $1 billion on
its investment in OneWest, according to a memo sent to clients.
The sale values the fund’s stake at $788 million, the person
said, and Paulson also received $551 million in dividends. The
fund paid $400 million for the stake in 2009.

Thain, the son of a doctor, grew up in Antioch, a rural
village on Illinois’s northern edge. He didn’t visit the East
Coast until he arrived at the Massachusetts Institute of
Technology in Cambridge to study electrical engineering. He went
directly to Harvard Business School and then New York-based
Goldman Sachs, where he worked in investment banking and traded
mortgage bonds.

Merrill Sale

In 1993, he moved into the administrative side of the
company -- known as operations, technology and finance -- and
later became chief financial officer. He eventually ascended to
president and chief operating officer under then-CEO Henry
Paulson.

Thain became CEO of the New York Stock Exchange, and in
2007 took the helm of Merrill Lynch as its losses began piling
up. Less than a year later, on the same September 2008 weekend
that Lehman Brothers Holdings Inc. collapsed, he persuaded Bank
of America Corp. to pay $29 a share for the firm, a 70 percent
premium. Within months, Merrill Lynch’s losses accelerated,
Thain was fired and he faced a public furor over the $1.2
million office remodeling and $3.6 billion of bonuses.

“We decorated it in the style that Merrill Lynch offices
were, which was very, very nice,” he said at the University of
Pennsylvania’s Wharton School in 2009. “If I had that to do
over again, I’d furnish it in Ikea.”